Trouble with XBOX 360??.....?

ok i just bought an xbox 360 arcade edition like a week ago and it was freezing quite a few times....now when im playing gears of war 2 in a random time in the game when im playing it stops and says "disc unreadable" something something something....and it seems to only be with gears of war 2,it seemed like it was messing up after the new dashboard downloaded but we hadnt even had it for very long before we got the new dashboard....so could somebody tell me...could it be gears of war 2? could it be the new dashboard? or one thing i really wanna know is....are the arcade editions made with lesser quality stuff thats why their so cheap?? please help i need to know weather i should return the xbox or not